One of the fastest growing industries in the U.S. today is solar energy, particularly solar for residential rooftops. Companies such as SolarCity (NASDAQ:SCTY), Vivint Solar (NYSE:VSLR), and SunPower (NASDAQ:SPWR) have brought solar energy within reach of the average consumer, managing to save them money along the way.
But not every solar installer is the same, and the companies are looking at customers very differently. In the future of solar, consumers will see solar brands much as they view brands of smartphones, clothing, or even big-box retailers.
Financing has been key to residential solar growth
Thus far in residential solar, financing options have been key. The $0 down solar lease has been an attractive way to go solar and save money, and SolarCity, Vivint, and SunPower have all used this strategy.
One of the keys to success in selling the solar lease is putting boots on the ground to educate customers. SolarCity has a number of sales strategies, including telemarketing, and Vivint Solar is sold primarily door-to-door. This has led to a lot of growth, but it doesn't exactly indicate that customers are making a sophisticated decision about the true value of solar.
Not every company sees its customers the same way
As solar companies emerge, they're taking different strategies in how they acquire customers. Vivint Solar has said it will only offer a lease for the foreseeable future and doesn't currently have plans to add energy storage. It's components are all the same across all systems, meaning customer choice isn't really an option. It's like the free phone you get with a cellular contract. No bells and whistles or ability to customize, but it'll work.
SolarCity is growing rapidly its sales network and at the same time improving technology. It has monitoring and energy storage options, as well as leases and loans for customers. It's trying to reach everyone who may want to go solar and offer a product that will work for anyone. To continue the phone analogy, this is the Samsung-Android of the solar industry.
SunPower is the premium player in the market, meaning it's the highest cost, but also the best technology. It has panels that are not only more efficient at the outset, but degrade more slowly, meaning more power over time. It also offers leases, loans, and cash sales along with monitoring and energy storage. But SunPower is intentionally going after the top end of the market, targeting customers who are willing to pay more for a better product. It's the Apple of the industry.
None of these strategies is necessarily better or worse than the other; they're just different. As investors, we can choose which strategy we think is best, but in reality this market is big enough for all three.
The solar market is changing
Being more educated about solar will be even more important in the future as solar energy becomes a central component in the home's energy infrastructure. Energy storage is something SolarCity and SunPower are both adding to solar systems and as this grows they'll be selling more of an energy service than just a kWh of electricity.
I recently talked with SunPower CEO Tom Werner about residential solar, and he said "total control" of energy is in the near future.
There's room for everyone in this market
As I said, there's room for everyone in solar, and the technology improvements Werner talked about will eventually make their way to the rest of the industry in one form or another. But with solar energy being less than 1% of electricity generation worldwide, the opportunity is big for everyone.
Travis Hoium manages an account that owns shares of SunPower and is personally long SunPower shares and options. The Motley Fool recommends and owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.